Understanding ESG Investing: A Path to Sustainable Future

ESG investing, which focuses on Environmental, Social, and Governance factors, is crucial for addressing global challenges and promoting sustainability. By considering impact portfolios, thematic portfolios, and systematic approaches, investors can be part of the solution by supporting companies that prioritize sustainability practices. The world needs to change, and ESG investing offers a way to drive positive environmental and social impact while ensuring good governance practices. From energy supply to food and agriculture, ESG investing encourages responsible choices that benefit society and the planet. Embracing ESG criteria can lead to a more balanced use of natural resources, tackle climate change, and foster fairer corporate governance. ESG investing aligns with the United Nations' goals and can help create a better world for current and future generations.

• ESG Investing
• Sustainability
• Impact Portfolio
• Thematic Portfolio
• Responsible Choices

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1. 1 An Introduction to ESG Investing An Introduction to ESG Investing Mike Seagrove & Calum Butt

2. Introduction to ESG Investing The World Needs to Change Being part of the solution Sustainability What is ESG Investing? Types of ESG Investment? Environmental Social Governance INTRODUCTION Impact Portfolio Thematic Portfolio Systematic Portfolio AG Approach to ESG Investment Systematic ESG Portfolio Overweight Best in Class Performance The destination is worth it 2

3. The World Needs to Change The world is facing many real challenges, important and in some cases urgent. 3

4. The World Needs to Change 4 Energy Supply Housing Sourcing greener energy Solar panels Smart meters Better insulation Appliance ratings Recycling Being Part of the Solution Travel Consumer Purchasing Carbon off-set for flights E-cars and fuel efficiency Methods of travel Avoid companies with poor reputations Favour good companies Animal testing choices Food & Agriculture Sustainable Investing Better animal welfare Food miles Avoiding deforestation (palm oil). Favour good companies Avoid worse companies Underweight less good companies 4

5. The World Needs to Change Sustainability Balancing the claims of the present, against the claims of the future. Making the world a better place Defining a more balanced use of natural resources Tackling climate change and caring for the environment Building a fairer society Driving better corporate governance ESG Investing can assist with all of these factors Source: United Nations 5

6. What is ESG Investing? Social Mass migration Wealth distribution Access to healthcare Workplace health and safety Diversity Employment rights, child labour and slavery Controversial weapons such as cluster bombs Governance Executive compensation Bribery and corruption Independent directors Ethics in business Transparent disclosure of ESG criteria Whistle-blowing policies Implications of business strategy on social and sustainability issues Environmental Biodiversity loss Greenhouse gas emissions Energy efficiency Renewable energy Resource depletion Ocean acidification Ozone depletion 6

7. What is ESG Investing? ESG investing can be broadly defined as integrating Environmental, Social and Governance factors of companies into the fundamental investment process How is this Integrated? Core portfolio analysis to include ESG credentials ESG ratings form part of decision Ratings Agencies (e.g. MSCI & Sustainaltics) Evaluation of ESG can be difficult lack of data 7

8. Types of ESG Investment 8 Impact Portfolio Thematic Portfolio Systematic Portfolio Seeking broad capital market returns From public markets Risk and return similar to traditional portfolio Remain broadly diversified Tilt toward better ESG credentials Impact harder to quantify Often private markets Direct involvement Return of capital + Concentration risks Liquidity and exit risk Impact closely measured Seeking capital market returns Public and private markets Themes e.g. renewable energy farms Company size tends to be smaller More highly concentrated Impact implied in theme choice

9. Our Preferred Approach to ESG Investment Low cost Passive options available Capture broad market returns Systematic ESG Portfolio Well diversified portfolios to reduce risk Retain Sector Weightings Steps in the right direction Suitable for large proportion of investors 9

10. Our Preferred Approach to ESG Investment Systematic ESG Portfolios in practice Improving the ESG Credentials of a portfolio. Key Notes Moves from market cap to ESG Rating Oil & Gas Not excluded - Why? Production of Cluster Munitions excluded Building a fairer society Strong ESG Credentials Better long term prospects 10

11. Our Preferred Approach to ESG Investment AG ESG Balanced Portfolio 60% AG ESG Moderately Adventurous Portfolio 40% AG ESG Moderately Cautious 80% Portfolio The AG ESG Model Portfolio range AG ESG Cautious Portfolio AG ESG Adventurous Portfolio 20% 100% 11

12. Our Preferred Approach to ESG Investment The Albert Goodman ESG Model Portfolio Performance Long term returns in line with broad global market Higher ESG credentials better longer term prospects Positive impact on the world *Returns are net of fund costs **Historic returns from 31/03/2021 1 Year returns post pandemic recovery Past performance is not indicative of future results and no Past performance is not indicative of future results and no representation is made that the stated results will be representation is made that the stated results will be replicated. replicated. 12

13. Our Preferred Approach to ESG Investment Comparison against non ESG investment Returns Comparison Risk Comparison *Returns are net of fund costs **Historic returns from 31/03/2021 Past performance is not indicative of future results and no Past performance is not indicative of future results and no representation is made that the stated results will be representation is made that the stated results will be replicated. replicated. 13

14. Our Preferred Approach to ESG Investment The destination is worth it . 1 2 Use a sensible ESG approach where available Maintain portfolio risk Better, more robust ESG Metrics A more consistent approach Great impact understanding 3 Wider product choices Better index construction Full asset class coverage 4 A better World 14

15. Important Notes This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. All information is based on sources that the firm believes to be reliable. No responsibility can be accepted for actions taken as a result of reading this document. Past performance is not indicative of future results and no representation is made that the stated Past performance is not indicative of future results and no representation is made that the stated results will be replicated. results will be replicated. Errors and omissions excepted. 15

16. Thank You Mike Seagrove Calum Butt Chartered Financial Planner Consultant michael.seagrove@albertgoodman.co.uk calum.butt@albertgoodman.co.uk